Pricing decisions

Purposes of pricing

• Covers the cost to produce and generates a profit
• Convey the value of the product
• Promote demand- imply value for money

BUT-

• Too expensive = customers won't buy
• Too cheap = undermines the value of the product to consumers. They may cnonclude that the product is low quality.

The market will indicate the level of price customers are prepared to pay.

A supply and demand graph can be used to show this. Where the two lines meet is the equilibrium. Over and under that point will either lead to an excess or lack of supply or demand.

Pricing strategies:

• Penetration pricing- low prices set to break into the market or to…